AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat—
Insufficient evidence for every rubric criterion; no category score is inferred.
structural advantage · — · Protected intellectual property and aged inventory are established, but comparative brand preference, cost superiority and defensible distribution access are not. The structural economic advantage remains uncertain.
durability · — · Renewable trademark protection and multiyear aging support possible persistence, but legal protection and production time do not establish enduring customer preference or excess returns.
customer dependency · — · Continued category sales show ongoing demand, but the passages do not establish customer reliance, switching friction or persistent preference for Brown-Forman over alternatives.
erosion resilience · — · Gross-margin recovery coexists with unfavorable price/mix, core-product volume weakness and a brand impairment. These results do not establish whether a durable competitive advantage is resisting erosion.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · 2/4 · Observed outcomes are mixed: favorable price/mix supported fiscal 2024–2025 results, followed by a 3% price/mix decline in fiscal 2026 and further unfavorable price/mix in the latest quarter. Mix and currency effects prevent attribution to pure selling-price changes or durable premium pricing.
retention · 2/4 · Indirect demand evidence is mixed. Latest-quarter whiskey sales were nearly unchanged and ready-to-drink sales grew, while tequila declined. Fiscal 2026 aggregate volume growth included distributor inventory increases and offset lower volumes of JDTW and JD RTD/RTP. No consumer retention rate is inferred.
margin resilience · 2/4 · Gross margin recovered from 58.9% in fiscal 2025 to 60.5% in fiscal 2026, with further year-over-year expansion in the latest quarter. Costs, currency and portfolio changes contributed, while latest-quarter operating margin declined. Resilience is demonstrated but cannot be attributed primarily to pricing power.
contractual freedom · — · Retailer demands for lower prices establish bargaining pressure, but the passages do not disclose price-reset rights, contractual restrictions or other terms sufficient to assess freedom to set prices.
Predictability78
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 25.00
- Revenue growth volatility (pp)
- 4.55
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 5.43
Financial strength77
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 74.26
- netDebtEbitGrade
- 56.16
- interestCoverageGrade
- 79.26
- currentRatioGrade
- 100.00
- Debt / FCF (x)
- 2.80
- Net debt / operating income (x)
- 2.19
- Interest coverage (x)
- 9.72
- Current ratio (x)
- 3.24
Capital allocation86
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 19.14
- 3-year average dilution (%)
- -0.90
- 3-year average SBC / revenue (%)
- 0.71
- cashConversionGrade
- 66.83
Management50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Actual cash generation, reduced capital spending and debt repayment provide support, alongside $400 million of completed repurchases. However, fiscal 2026 operating-cash growth largely reflected working capital rather than earnings, and the Gin Mare impairment is an adverse investment outcome. Latest-quarter long-term debt repayment was substantially offset by short-term borrowing. Repurchase value creation is unestablished.
incentive alignment · 2/4 · Granted multiyear equity awards use relative shareholder returns and operating-income growth. Actual shares issued in May 2026 used a 55% performance multiplier, demonstrating performance sensitivity. Excluding transaction-related costs from incentive measures tempers the assessment; ownership balances and complete payout details are missing.
execution · 2/4 · Restructuring actions were completed with disclosed charges, and latest-quarter organic operating income grew 4%. These achievements coexist with declining reported sales and operating income, multiyear uneven underlying operating growth and a prior brand impairment. This is an indirect operating assessment, not proof of sustained superior execution or quantified restructuring savings.
governance · 2/4 · An independent compensation committee, separate chairman and CEO, and a serving lead independent director provide safeguards. Family voting control and use of the nominating-committee independence exemption limit minority shareholder influence. These are disclosed arrangements, not assumptions that family ownership ensures alignment.
Evidence
Our intellectual property includes trademarks, copyrights, proprietary packaging and trade dress, proprietary manufacturing technologies, know-how, and patents.
Business — intellectual property · Filed 12/06/2026
We register our trademarks broadly around the world, focusing primarily on where we sell or expect to sell our products.
Business — trademark registration · Filed 12/06/2026
Depending on the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained.
Business — trademark duration · Filed 12/06/2026
Because we age most of our whiskeys in barrels for three years or more, we bottle and sell only a portion of our whiskey inventory each year.
Accounting policies — whiskey aging and inventories · Filed 12/06/2026
Volume increased 2% driven by New Mix and the launch of JDTB, due in part to a net increase in distributor inventories in the United States, partially offset by the end of the Korbel relationship and the Sonoma-Cutrer prior-year TSA, as well as lower volumes of JDTW and JD RTD/RTP.
Fiscal 2026 results — volume and distributor inventories · Filed 12/06/2026
Price/mix declined 3% driven by unfavorable portfolio mix from New Mix and lower sales of used barrels and JDTW, partially offset by the positive effect of foreign exchange and the positive portfolio mix impact from JDTB, JD RTD/RTP, and Woodford Reserve.
Fiscal 2026 results — price/mix · Filed 12/06/2026
The decrease was primarily due to the absence of the gains on sale of the Sonoma-Cutrer wine and Finlandia vodka businesses, the decline in gross profit, and the Gin Mare brand name impairment, partially offset by lower operating expenses, including the favorable fair value adjustment to Gin Mare’s contingent consideration liability.
Fiscal 2025 results — operating-income drivers and Gin Mare impairment · Filed 13/06/2025
While we seek to take advantage of the efficiencies and opportunities that large retail customers can offer, they often seek lower pricing and increased purchase volume flexibility, offer competing private label products, and represent a large number of other competing products.
Risk factors — retailer bargaining power · Filed 12/06/2026
As a result, consumers may begin to shift their consumption and purchases away from our premium and super-premium products, or away from alcoholic beverages entirely.
Risk factors — potential shifts away from premium products and alcohol · Filed 12/06/2026
The decline in reported net sales was driven by lower volumes, largely offset by favorable price/mix and the positive effect of acquisitions and divestitures.
Fiscal 2024 results — volume and favorable price/mix · Filed 14/06/2024
The decrease in gross margin was driven by higher costs, the negative effect of foreign exchange, and the negative effect of the restructuring initiative, partially offset by favorable price/mix, the impact of JDCC, and the positive effect of acquisitions and divestitures.
Fiscal 2025 results — gross-margin drivers · Filed 13/06/2025
The decrease was driven by unfavorable price/mix and the end of the Korbel relationship, partially offset by higher volumes, the positive effect of foreign exchange, and the impact of the JDCC transition.
Quarter ended July 31, 2026 — net-sales drivers · Filed 02/09/2026
Gross margin increased to 60.5% in fiscal 2026, up 1.6 percentage points from 58.9% in fiscal 2025.
Fiscal 2026 results — gross margin · Filed 12/06/2026
The increase in gross margin was driven by the positive effect of acquisitions and divestitures, the positive effect of foreign exchange, and lower costs.
Fiscal 2026 results — gross-margin drivers · Filed 12/06/2026
23 Summary of Operating Performance Three Months Ended July 31, (Dollars in millions) 2025 2026 Reported Change Organic Change1 Net sales $ 924 $ 911 (1 %) (1 %) Cost of sales 372 362 (2 %) (5 %) Gross profit 552 549 (1 %) 1 % Advertising 120 114 (5 %) (4 %) SG&A 177 185 4 % 5 % Restructuring and other charges 12 — (100 %) nm2 Other expense (income), net (17) (2) nm2 nm2 Total operating expenses3 292 297 2 % (1 %) Operating income 260 252 (3 %) 4 % Non-operating postretirement expense $ 19 $ 1 nm2 Interest expense, net $ 21 $ 22 3 % As a percentage of net sales4 2025 2026 Reported Change Gross margin 59.8 % 60.2 % 0.4 pp Operating margin 28.2 % 27.7 % (0.5) pp Effective tax rate 22.5 % 23.0 % 0.5 pp 2025 2026 Reported Change Diluted earnings per share $ 0.36 $ 0.38 6 % Note: Totals may differ due to rounding 1See “Non-GAAP Financial Measures” for details on our use of “organic change,” including how we calculate these measures and why we believe this information is useful to readers.
Quarter ended July 31, 2026 — reported and organic operating performance · Filed 02/09/2026
The increase in gross margin was driven by lower costs and the end of the Korbel relationship, partially offset by the negative effect of foreign exchange and unfavorable price/mix.
Quarter ended July 31, 2026 — gross-margin drivers · Filed 02/09/2026
Net Sales The following table shows our net sales by geography1: Three Months Ended July 31, (Dollars in millions) 2025 2026 United States $ 385 $ 374 Emerging 224 247 Developed International 257 240 Travel Retail 44 44 Non-branded and bulk 14 6 Total $ 924 $ 911 The following table shows our net sales by product category1: Three Months Ended July 31, (Dollars in millions) 2025 2026 Whiskey $ 659 $ 658 Ready-to-Drink 128 154 Tequila 62 54 Rest of portfolio 61 39 Non-branded and bulk 14 6 Total $ 924 $ 911 1See “Definitions” for definitions of geographic and brand aggregations for items presented here.
Quarter ended July 31, 2026 — sales by geography and product category · Filed 02/09/2026
Therefore, it is possible that our shipments do not coincide with distributors’ downstream depletions and merely reflect changes in distributors’ inventories.
Definitions — shipments versus distributor depletions · Filed 02/09/2026
Cash provided by operating activities of $1,000 million during fiscal 2026 increased $402 million from fiscal 2025.
Fiscal 2026 cash flows — operating cash generation · Filed 12/06/2026
The increase was largely attributable to lower working capital requirements, including lower cash paid for income taxes, partially offset by lower earnings.
Fiscal 2026 cash flows — working-capital and earnings drivers · Filed 12/06/2026
Under the Repurchase Program, we repurchased 705,139 Class A shares at an average price of $28.10 per share and 13,348,510 Class B shares at an average price of $28.48 per share, for a total cost (excluding brokerage fees and excise taxes) of $400 million.
Share repurchases — completed purchases · Filed 12/06/2026
9 BROWN-FORMAN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in millions) Three Months Ended July 31, 2025 2026 Cash flows from operating activities: Net income $ 170 $ 176 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 22 23 Stock-based compensation expense 4 4 Deferred income tax benefit (8) (9) Change in fair value of contingent consideration — 4 Other, net 3 3 Changes in assets and liabilities: Accounts receivable (13) 7 Inventories (61) (39) Other current assets 15 42 Accounts payable and accrued expenses (46) (82) Accrued income taxes 51 31 Other operating assets and liabilities 23 13 Cash provided by operating activities 160 173 Cash flows from investing activities: Additions to property, plant, and equipment (31) (12) Proceeds from sale of cooperage assets 33 — Other, net — (1) Cash provided by (used for) investing activities 2 (13) Cash flows from financing activities: Net change in short term borrowings (30) 289 Repayment of long-term debt — (343) Payments of withholding taxes related to stock-based awards (1) (3) Dividends paid (107) (106) Other, net — (1) Cash used for financing activities (138) (164) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 3 (3) Net increase (decrease) in cash, cash equivalents, and restricted cash 27 (7) Cash, cash equivalents, and restricted cash at beginning of period 463 327 Cash, cash equivalents, and restricted cash at end of period 490 320 Less: Restricted cash (included in other current assets) at end of period (19) (19) Cash and cash equivalents at end of period $ 471 $ 301 Supplemental information: Non-cash additions to property, plant and equipment $ 2 $ 4 Right-of-use assets obtained in exchange for new lease obligations $ 14 $ 5 See notes to the condensed consolidated financial statements.
Quarter ended July 31, 2026 — cash-flow statement · Filed 02/09/2026
We have now completed these actions and do not expect to incur any additional restructuring charges related to the restructuring initiative.
Restructuring note — completion of actions · Filed 02/09/2026
We incurred aggregate restructuring and other charges of $67 million in connection with these actions, consisting of $31 million in severance and other employee-related costs, $34 million in other restructuring charges primarily related to the Brown-Forman Cooperage facility closure and consulting services associated with the restructuring actions, and $2 million in other charges for cooperage asset impairments.
Restructuring note — aggregate charges · Filed 02/09/2026
The target long-term incentives granted in fiscal 2026 for the fiscal 2026-2028 performance period were divided into two equity-based components: performance-based restricted stock units (PBRSUs), and stock-settled stock appreciation rights (SSARs).
Compensation discussion — fiscal 2026 equity awards granted · Filed 18/06/2026
Performance is measured by comparing the three-year cumulative TSR of Brown-Forman’s Class B common stock with the three-year cumulative TSR of the custom peer group (shown on the following page) and the three-year compound annual growth rate (CAGR) of Brown-Forman’s adjusted operating income relative to the same peer group.
Compensation discussion — relative performance measures · Filed 18/06/2026
Reflects the number of shares of restricted Class A or Class B common stock that were issued on May 27, 2026, upon satisfaction of the performance measures prescribed for the performance-based restricted stock awards granted on July 27, 2023.
Compensation tables — shares issued after performance conditions were satisfied · Filed 18/06/2026
The number of shares issued was determined by multiplying the target award by a three-year performance percentage of 55%, and then adjusting the resulting number upwards to account for dividend yields during the second and third years of the performance period.
Compensation tables — realized 55% performance multiplier · Filed 18/06/2026
For purposes of our 2026 Short-Term Incentive Cash Compensation Program and 2024-2026 Long Term Incentive Program, we further adjusted organic operating income to exclude these costs from the determination of adjusted organic operating income growth because they were non-recurring and atypical in nature, they were not contemplated when the organic operating income growth performance metrics were established, and they are not reflective of the ongoing operational performance of the Company.
Compensation reconciliation — exclusion of transaction-related costs · Filed 18/06/2026
Risks Related to Our Ownership and Corporate Governance Structure The Brown family has the ability to control the outcome of matters submitted for stockholder approval.
Ownership and governance — family voting control · Filed 12/06/2026
We may avail ourselves of the exemption from having a board composed of a majority of independent directors, and we utilize the exemption from having a fully-independent nominating/corporate governance committee.
Ownership and governance — independence exemptions used · Filed 12/06/2026
Each member of the Compensation Committee qualifies as an independent director under NYSE listing standards (including the heightened independence standards for compensation committee members of non-controlled companies) and as a “non-employee director” under SEC rules.
Governance — compensation committee independence · Filed 18/06/2026
However, we have had a separate Chairman of the Board and Chief Executive Officer since 2007.
Governance — separate chairman and CEO roles · Filed 18/06/2026
Michael A. Todman has served in this role since July 2023.
Governance — serving lead independent director · Filed 18/06/2026
RECONCILIATION OF ADJUSTED, ORGANIC, ADJUSTED ORGANIC, AND TRANSACTION-ADJUSTED OPERATING INCOME YEAR OVER YEAR CHANGE PERCENTAGE CHANGE VERSUS PRIOR FISCAL YEAR 2022 2023 2024 2025 2026 Change in reported operating income (GAAP) 3% (6)% 25% (22)% (10)% Acquisitions and divestitures 14% 4% (27)% 16% 5% Impairment charges 6% 3% (7)% 4% 8% Other items(2) (2)% —% 2% 2% (4)% Change in adjusted operating income (non-GAAP) 21% 1% (6)% 1% (1)% Foreign exchange 6% 7% 4% 3% (1)% Change in organic operating income (non-GAAP) 27% 8% (2)% 3% (2)% Contemplated transaction costs —% —% —% —% 4% Change in adjusted organic operating income (non-GAAP) 27% 8% (2)% 3% 2% Less: Foreign exchange (6)% (7)% (4)% (3)% 1% Change in transaction-adjusted operating income (non-GAAP) 21% 1% (6)% 1% 3% (2) “Other items” includes “substitution drawback claims,” “restructuring initiative,” “foundation,” “franchise tax refund,” and “JDCC.”
Appendix A — multiyear operating-income reconciliation · Filed 18/06/2026
SPECIAL PEER GROUP COMPANY WEIGHTING Diageo plc 29% Pernod Ricard SA 29% Rémy Cointreau SA 14% Davide Campari-Milano N.V.
Compensation discussion — special peer group · Filed 18/06/2026
14% LVMH Moët Hennessy – Louis Vuitton, Société Européenne 14% The table below shows the target one-time PBRSU awards to each NEO in fiscal 2026 for the fiscal 2026-2028 performance period: TARGET ONE-TIME PBRSU AWARDS FOR FISCAL 2026-2028 PERFORMANCE PERIOD NAME NUMBER OF SHARES GRANTED VALUE OF SHARES AT GRANT Lawson E.
Compensation discussion — special peer group continued · Filed 18/06/2026
